Posted on: February 4th, 2018
By Mark Cardwell
Pierre Gagnon is no stranger to the business of mining iron ore. A mining engineer by trade, he worked several years for Quebec Cartier Mining (now part of ArcelorMittal) in the town of Fermont before joining Port of Sept-Îles as President and Chief Executive Officer in 2002. Since then, Gagnon has been working to help the Port’s major clients deal with the challenges of reaching global markets with the 80 billion tonnes of high quality iron ore reserve known to exist in the Labrador Trough.
“It is one of the purest iron ore sources in the world with the fewest contaminants,” Gagnon says about the ferrous deposits in the trough, a 160-kilometre-wide, sausage-shaped landform that starts 400 km north of Sept-Îles and stretches 1,200 km north to Ungava Bay. “It is highly prized for its qualities, which adds a premium value and increased price.” Quality, together with several critical infrastructure developments at his facility over the past year, have Gagnon feeling bullish about the prospects of the Port of Sept-Îles in the not-too-distant future.
Since the 1950s, when iron ore started being mined from the Labrador Trough and shipped south to Sept-Îles via the Quebec North Shore and Labrador Railway from first Shefferville, then the Wabush and Labrador City, NL areas, the mineral has been both the backbone and the lifeblood of the community on Quebec’s North Shore.
Iron ore comprises more than 90 percent of the roughly 25 million tonnes of cargo that are shipped from the port each year. Though Sept-Îles is a small player on the world stage, accounting for only 2-3 percent of world supply, Gagnon says that many steel-making facilities, notably in China, are blending high-quality iron ore with the lower-quality material supplied by world-leading producers like Australia and Brazil. Blending helps to produce better steel products with better efficiencies and less of an environmental footprint.
“China buys 60 per cent of all minerals in the world,” says Gagnon. “But they have recently brought in policies to reduce greenhouse gas emissions in their steel production industry.” Those policies, he adds, are driving up both demand and premiums for top-quality iron ore like the kind that ships through his port. Premiums have more than doubled in recent years from between $5 and $6 USD a ton to between $12 and $15 USD a ton. That is on top of the current world price of roughly $60 USD a ton for iron ore, which has been quite volatile since the beginning of the year with a high of $89 USD in March, compared to a low of $38 USD in late 2015. Though double what it was when Gagnon joined the Port, the current world price for iron ore is still only a third of the record $193 USD a ton it reached briefly in 2008.
While he has no control over the supply-and-demand driven world price for iron ore, Gagnon is feeling confident about the Port’s ability to both maintain and enhance its role as the main gateway to the global market for Canadian iron ore producers. In addition to the growing popularity and environmental advantages of blending, which he says is providing “a nice bump” in revenues for the Port’s current iron ore producers, Gagnon says several recent and imminent developments have set the stage for a major upswing in the Port’s fortunes in the immediate and near future.
One was the signing in late 2016 of a long-term commercial agreement between the Port and its new partner and client, the Quebec government-backed Société ferroviaire et portuaire de Pointe-Noire (SFPPN). The latter is a limited partnership that was created to own and operate assets purchased from Cliff’s Natural Resources operating under protection from its creditors. These assets include rail lines, access to port facilities, rail yards, a pellet plant, administrative offices and about 1200 hectares of land. The Port itself was successful with the acquisition of 400 hectares of land to unlock the future growth of the sector.
For years, Cliff’s refusal to negotiate service on its rail network giving access to the port stymied development in the sector and led to years of acrimonious relations and highly-publicized lawsuits. “Assuring accessibility and potential capacity growth at Port of Sept-Îles responds to the needs of businesses in the area and is a priority action in Plan Nord for 2015-20,” Pierre Arcand, Quebec’s minister of economy, science and innovation, said when SFPPN acquired Cliff’s assets. “Thanks to this acquisition, companies engaged in the mining of iron ore on the North Shore can benefit from the access they will now have to the new multi-user dock in the port of Sept-Îles.”
Based on the same approach that inspired the 2012 agreement for the construction of the multi-user wharf, the agreement between the Port and SFPPN called for a sharing of the SFPPN’s loading equipment, storage and handling facilities at Pointe-Noire, and the construction of a 300-metre-long galleried conveyor belt that would finally link the multi-user wharf with the laydown area for users’ stockpiles. The Quebec government also promised to provide $15 million in financing to ensure those final links were built and operational.
“With the iron market in recovery mode and our region in need of diversification projects, these agreements come at the perfect time to give our mining industry a shot in the arm,” Gagnon said at the press conference to announce the deal last December. “The Port wishes to acknowledge the leadership of the Quebec government in the creation of this innovative business model that creates a North American shipping and handling terminal that is unique for its structure and multi-user mission,” Gagnon said then.
At a follow-up press conference at the Port in April, the government announced that two producers – Tata Steel Minerals Canada and Quebec Iron Ore Inc., a subsidiary of Champion Iron Limited – had joined SFPPN to manage and develop the industrial facilities at Pointe Noire, including the pellet plant. The partnership’s first priority will be to build a conveyor to connect the Pointe Noire facilities with the Port’s multi-user wharf. In July, it hired a local firm, Groupe G7, to the build the long-awaited missing link between the storage facilities and the multi-user wharf. That work is expected to be completed before year’s end.
More good news has also been announced of late by Port partner Quebec Iron Ore Inc. a subsidiary of Champion Iron Limited. One of the five original partners in the multi-user wharf project – along with Tata, the only one currently operating and shipping, Labrador Iron Mines, which has liquidated its assets and ceased operations, and New Millennium and Alderdon, which like Quebec Iron Ore Inc. are not yet producing – the Montreal-based junior iron ore mine developer and explorer has secured its financing as mentioned in its October 16 press release and will now reopen the massive Bloom Lake mine it acquired from Cliff’s in the Labrador Trough. “Investment is always a telltale sign of good things to come,” says Gagnon.
He says if Quebec Iron Ore Inc.’s plans pan out, it will be the first company to flow iron ore out to the global market through the multi-user wharf in Sept-Îles in March or April, 2018. By then, the proverbial cherry will have been placed on the Port’s sundae: the start-up of the galleried conveyor that is now being connected to the two shiploaders on the multi-user wharf.
“The two largest shiploaders in Canada on the deepest wharf in North America will finally begin filling the biggest ships in the world,” says Gagnon. “That will be a historic day in the life of the Port, and definitely be cause for celebration.”
Once in full operation, Gagnon says the new multi-user facility could triple the port’s capacity from 30 million to 90 million tonnes a year. A new era has definitely dawned for the Port of Sept-Îles.